One thing that worries poor James Ferguson more than anything else is that the government actions taken to prevent us falling into depression look like they’ve been successful. The danger, he says, is that our leaders fall into the trap of thinking all is well and then raise interest rates before it is safe to do so.
But if Mervyn King is to be believed, James has nothing to fear. This week’s inflation report saw King suggesting there could be more quantitative easing (QE) on the way, and fretting about inflation falling below 2% for several years, as the strength of the recovery remains “highly uncertain”.
We’d say less uncertain than positively awful. This week has seen a torrent of bad news on everything from real wages (falling even for graduates) to retail sales (which saw their worst growth for 15 years). And it’s starting to dawn on everyone that if the best the UK can manage even with endless bank bail-outs, QE, and cash for clunkers, is GDP growth of a statistically irrelevant 0.1%, then things really aren’t good.
Meanwhile, stockmarkets are (as they should be, given all this uncertainty) miserable. Pretty much the only bright spot the optimists can point to is the fact that house prices are still rising in Britain.
Finally, a word on Toyota. Clearly, the massive recall of around 8.5 million of their cars, notably 300,000 of their celebrity-adored Prius models, has been horrible news for the brand and for the business. But is it really as terminal as the mainstream media seems to think?
I suspect not. Other firms have come back from worse. Remember the Ford Bridgestone tyre recall back in 2000? Then hundreds of Ford Explorers overturned as their tyres blew out: there were said to have been as many as 250 related deaths and more than 3,000 “catastrophic injuries” associated with the problem. Ford hasn’t done that well since (although it would be hard to make a case for the recall being a primary cause of that), but Bridgestone hasn’t suffered at all.
Indeed, look at the chart of the share price and you’ll find that 2000 was actually a pretty good time to buy the shares. Stockmarkets as a whole have gone nowhere since, but Bridgestone is 50% off its 2000 lows. And given how much Toyota shares have fallen since its own scandal kicked off, the same could end up being true of Toyota. Right now the shares are back to trading at around their book value. You don’t get chances to buy companies such as Toyota at book value very often, as John Millar, manager of the Martin Currie Japan Fund, told me this week. But you have it today. So “why wouldn’t you”?